Ending months of uncertainty, Etihad agrees to raise Jet stake

MUMBAI: Etihad Airways has formally communicated its intent to raise its stake in Jet Airways, ending months of uncertainty over its commitment to remain invested in one of the world’s fastest-growing aviation markets.

The Abu Dhabi-based airline submitted its expression of interest (EoI) on Thursday, said three people in the know. The development spells relief for Jet’s lenders, who have been struggling to save the sinking carrier that was forced to take the unprecedented step of cancelling all international operations on Thursday evening.

The lenders have been working behind the scenes to persuade Etihad to bid for a majority stake in Jet. The Gulf carrier currently owns 24% and was reluctant to buy more. In March, Etihad had told Jet’s lenders that it would not raise its stake in the beleaguered airline and wanted the banks to buy out its shareholding at Rs 150 per share.

Etihad now joins other bidders who had put in EoIs on Wednesday. The last date for submitting EoIs was extended to April 12, from April 10, to accommodate more bids. The EoIs are non-binding.

Speculation was rife on Thursday that Jet founder Naresh Goyal may try to team up with a foreign carrier to submit an EoI. This could not be confirmed with Goyal, but such a move would lead to Jet becoming a battleground between its two biggest shareholders, raising the question of why neither agreed to recapitalise the airline since problems surfaced last year.

An Etihad spokesperson refused to comment on rumours or speculation. Jet didn’t respond to an emailed query.

It wasn’t clear whether Etihad has mentioned if it intends to tie up with a partner. It can raise its holding in Jet to 49%, the maximum that a foreign carrier can hold in a domestic airline.More EoIs Expected Today, say LendersAlso, a foreign airline can’t effectively own and control an Indian carrier. Jet’s lenders have approached PE funds such as TPG Capital and the Indian government-anchored National Investment and Infrastructure Fund.

NIIF doesn’t need to submit an EoI and can directly bid for Jet, according to conditions laid out in the bid document. It has got an investment from the Abu Dhabi Investment Authority, a sovereign wealth fund.

Etihad had been insisting it should be exempted from a capital markets rule that requires an investor to make an open offer for at least 20% more shares in the target company if the acquirer’s shareholding crosses 25%. The Securities and Exchange Board of India has refused any exemption to any company. Jet’s lenders expect some more EoIs on Friday. The qualified bidders will have to submit binding bids by April 30.

Meanwhile, Jet’s operational crisis continued. The airline has suspended all international operations from India. Over the past few months, the airline had discontinued flights to most short-haul overseas destinations. On Thursday, it cancelled the remaining flights — to Amsterdam, Paris and London. The airline operated 14 planes on Thursday, and by the end of the day, even lesser. It had a fleet strength of 124 in December.

State-run Indian Oil Corp had on Wednesday stopped fuel supply to Jet between 3 pm and 8:30 pm. The supply resumed after the airline made partial payments. However, all flights had to be rescheduled. The airline has defaulted on loans, which has triggered the sale process by the lenders. It has delayed salaries since October, defaulted on payments to lessors and vendors, and grounded more than 80% of its fleet.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.